While APAC markets continued to dominate the top 10, the Philippines dropped out of the list to rank 12th (2021: 9th). Singapore, on the other hand, rose 24 spots to rank 14th this year (2021: 38th).
India, China, and Malaysia have emerged among the top three locations worldwide for potential offshore services, according to Kearney's 2023 Global Services Location Index (GSLI).
The Index, published on Tuesday (8 August 2023), ranked 78 markets in total, based on 52 metrics that cover four dimensions: financial attractiveness, people skill and availability, business environment, and political & social risks.
The Index also focused on the importance of talent regeneration in maintaining and enhancing each location's attractiveness for offshore businesses. It stated: "How rapidly a country reskills and redeploys its workforce in response to changing market demands and technological disruptions is influenced by factors such as its education system, labour market conditions, immigration policies, government support, and digital infrastructure.
"Countries that can quickly regenerate their talent pool have a competitive edge over those that face skills shortages and mismatches."
According to the index, India, China, and Malaysia continue to lead thanks to their immense cost advantage, abundant talent pool, and strong skills. India and China also show signs of strength in talent regeneration capabilities, making them global frontrunners in availability of a tech-enabled workforce.
While Asia Pacific (APAC) markets continued to dominate the top 10, the Philippines dropped out of the list to rank 12th (2021: 9th). Singapore, on the other hand, rose 24 spots to rank 14th this year (2021: 38th). The overall top 10 are as follows:
- India (2021: 1st)
- China (2021: 2nd)
- Malaysia (2021: 3rd)
- Brazil (2021: 5th)
- The UK (2021: 8th)
- Indonesia (2021: 4th)
- Vietnam (2021: 6th)
- The US (2021: 7th)
- Thailand (2021: 10th)
- Mexico (2021: 11th)
Among the countries studied, those that saw the most improvement between 2021 and 2023 include:
- Singapore (rank 14, +24 spots)
- Japan (rank 18, +4 spots)
- Hungary (rank 19, +18 spots)
- UAE (rank 21, +4 spots)
- Canada (rank 22, +24 spots)
- Morocco (rank 28, +12)
- South Korea (rank 37, +4)
A market-specific snapshot of each market within APAC
The report noted reasons for selected countries' performance on the Index. Read on for an excerpt on countries in APAC:
India (GSLI rank 1): India is cited as a traditional leader in outsourcing because the country has a skilled workforce at a low cost. Demand is booming for AI, machine learning (ML), and data processing skills, which are expected to be the top technologies in the next five to 10 years.
In that vein, the government has launched programmes such as PM Kaushal Vikas Yojana 4.0 to upskill 4.7mn people on industry 4.0 technologies such as AI, 3D printing, drones, and the Internet of Things (IoT). To keep the momentum, India is building on its strong science, technology, engineering, and math (STEM) backbone and educating young students on crypto, AI, and other new-age technologies under the National Education Policy 2020. The new National Data Governance Policy will strengthen India as a high-skill, low- to mid-cost market and fulfill the vision to 'Make AI in India'.
China (GSLI rank 2): As noted in the report, China is a tech leader focusing on self-sufficiency amid the tech stack wars with the west. A leader in filing tech-based patents on AI, ML, quantum computing, blockchain, and cloud, China's economy is in the forefront in the adoption of digitalisation, with a strong focus on digital skills enhancement. The nation is building a strong STEM education system by introducing emerging technologies such as AI, analytics, and 3D design along with high cognitive, social, and emotional skills at an early stage. In addition, many application-oriented universities are open to flexible paths, such as the "3+4" program.
The government is also working with employers to develop industry-specific frameworks that identify the skills that workers need to succeed in each industry, and employers are investing in training and development to keep their employees up to date on the latest technologies and trends.
Malaysia (GSLI rank 3): Malaysia benefits from a strong focus on building digital skills, the adoption of emerging technologies, and government support for developing digital skills. A workforce equipped with advanced digital skills such as cloud architecture, analytics, AI, and software development contributes an estimated US$105.7bn a year to the country's GDP. Seen as a hub for top companies, Malaysia's digital economy has initiatives to help tech start-ups integrate across the region, and the country is making investments to attract Fortune 500 tech companies to create high-value jobs.
The country is also banking on public–private partnerships to narrow the skills gap and achieve the goals of its transformative Malaysia 5.0 initiative while also fulfilling initiatives such as the #MyDigitalMaker Movement, eUsahawan, Premier Digital Tech Institute, and Digital Skills Training Directory to upskill and reskill its population.
Indonesia (GSLI rank 6): Given its large population, Indonesia has a massive workforce of about 135mn people. Yet, the country faces a shortage of skilled workers. As shared in the report, only 40% of the Indonesian workforce has the skills needed to work with emerging technologies, which led to it slipping two spots on this year's GSLI.
Indonesia's emerging focus on digital skills enhancement is helping it resurge, with IT giants expressing interest in investing in the digital economy because of its cost-effectiveness. Additionally, the central government in Jakarta has been seeking support from the US and Japanese decision-makers to make Indonesia a corporate relocation center. The government is also prioritising vocational training to strengthen skills and has launched Kartu Prakerja, a digital adult learning programme.
Vietnam (GSLI rank 7): Vietnam remains a strong Asian outsourcing destination. The presence of major technology companies demonstrates that the country is a global digital hub, motivating it to continue upskilling its workforce.
Thailand (GSLI rank 9): Thailand jumped one spot on the back of its financial attractiveness and business environment, according to the analysis. As shared further, the country's future lies in capitalising on its population's digital skills to become an innovation hub. Thailand's digital transformation efforts have been intensifying, with the Ministry of Labor partnering with public firms to upskill about 4mn digital citizens and launching a Smart Skills programme to provide access to online courses on digital skills such as IT support and data analytics.
The Philippines (GSLI rank 12): The Philippines continues to be the business process outsourcing (BPO) engine of Asia, as the report pointed out: it is home to more than 1,000 BPO companies with nearly 1.2mn employees. However, it slipped three spots in this year's GSLI, primarily because of the rise of Mexico and Colombia as nearshore capability centers with proximity to the US.
With growing demand for technologies such as AI, ML, the IoT, and automation, the demand for a skilled workforce is also growing. To seize this opportunity, the government offers the Technical Education and Skills Development Authority and a wide range of courses in the BPO sector—from basic customer service to more specialised knowledge such as data analysis and cloud computing.
Singapore (GSLI rank 14): Per the analysis, the 24-spot jump in Singapore's ranking is primarily because of its digital resonance and capabilities to foster innovation, which is reflected in the country's thriving tech-based start-up ecosystem. Its tech economy will need another 1.2mn digitally skilled workers by 2025, and with demand growing, the need for a suitable workforce will also grow.
To meet this demand, the government is working through research, innovation, and enterprise plans, including a $19 billion investment over a five-year period to advance its R&D landscape. Singapore is also investing in training programmes and initiatives to help workers develop their skills and in support initiatives such as SkillsFuture Singapore, TechSkills Accelerator, and Industry Transformation Maps. Private-sector firms are, at the same time, investing in the development of a skilled workforce, and many private collaborations are aimed at upscaling private companies and educational institutions.